Gov. Mary Fallin signed legislation that provides for a permanent, lowered tax rate for new oil
and natural gas wells.

House Bill 2562 passed in the House of Representatives 61-34 and 30-14 in the Senate.

The legislation will put the initial gross production tax rate at 2 percent for 36 months for all new wells. The new provision would eliminate the three-year sunset and also apply to both horizontal and vertical wells. The agreement means all Oklahoma oil and natural gas producers, large and small, would have a permanent tax structure for any new well.

"Gov. Fallin and legislative leaders should be commended for their commitment to growing Oklahoma's economy," OIPA President Mike Terry said. "Approval of House Bill 2562 will help keep Oklahoma a leader in oil and natural gas activity, and the benefits created through increased jobs and tax revenue will impact all Oklahomans."

The bill also includes a suite of oil and gas tax provisions set to expire this year, including provisions for enhanced recovery projects for economically at-risk wells, re-established production at inactive wells, production enhancement projects, discovery wells and three-dimensional seismic shoots.

"It is Oklahoma companies that are leading our nation's oil and gas renaissance, and House Bill 2562 ensures those companies continue to explore for and produce the natural resources in our own home state," Terry said. "There is competition every day to keep drilling dollars here in Oklahoma. Maintaining a competitive business climate is essential, and a tax structure in place that encourages producers large and small to increase development of oil and natural gas in Oklahoma is an important part of that equation.

"The oil and natural gas industry is the backbone of Oklahoma's economy, but the easy-to-find, inexpensive-to-produce oil and natural gas is long gone. What remains are energy resources locked beneath Oklahoma’s red soil that require advanced technology to find and are costly to produce. By providing tax programs that encourage the continued production of older oil and natural gas fields, the discovery of new fields and the use of expensive and time-consuming production enhancement techniques, the lifeblood of our state economy will continue to flow."

Passage of HB2562 would not have been possible without the hard work of many, including Speaker of the House Jeff Hickman, Senate President Pro Tempore Brian Bingman, Sen. Rob Johnson, Sen. Bryce Marlatt and the countless OIPA members who made phone calls and filled the halls of the Capitol in the days leading up to the vote.

Given the session-long debate that surrounded the horizontal well tax provision at the legislature this year, approval of the bill in the Senate and House is a significant victory for the OIPA and the industry.